U.S. Pending Home Sales Reach Nearly Two-Year High In January

2/27/2012 10:22 AM ET

Pending home sales in the U.S. rose by more than expected in the month of January, according to a report released by the National Association of Realtors on Monday, with the pending home sales index rising to its highest level in almost two years.

NAR said its pending home sales index rose 2.0 percent to 97.0 in January from a downwardly revised 95.1 in December. Economists had been expecting to index to increase by about 1.5 percent.

With the bigger than expected increase, the index rose to its highest level since coming in at 111.3 in April of 2010, when buyers were rushing to take advantage of the home buyer tax credit.

A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Lawrence Yun, NAR chief economist, said, "Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year."

"With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations," he added.

The increase by the pending home sales index reflected notable increases in pending home sales in the South and the Northeast, where pending sales rose by 7.7 percent and 7.6 percent, respectively.

On the other hand, pending home sales in the West fell by 4.4 percent and pending home sales in the Midwest dropped by 3.8 percent.

"Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery," Yun said.

He added, "If and when credit availability conditions return to normal, home sales will likely get a 15 percent boost, speed up the home-price recovery, and thereby significantly reduce the number of homeowners who are underwater."

Last Friday, the Commerce Department released a report showing a modest drop in new home sales in the month of January, but sales came in well above estimates due to a revision to the December data.

The Commerce Department said new home sales slipped 0.9 percent to an annual rate of 321,000 in January from the revised December rate of 324,000. Economists had expected new home sales to edge up to 315,000 from the 307,000 originally reported for the previous month.

A separate report from NAR released last Wednesday showed a notable increase in existing home sales in January, although the report also showed a significant downward revision to the data for December.

The report showed that existing home sales rose 4.3 percent to an annual rate of 4.57 million in January from a downwardly revised 4.38 million unit rate in December.

While the monthly increase far exceeded the 1.1 percent growth anticipated by economists, the number for December was well below the 4.61 million unit rate that had originally been reported.